Abstract

This paper analyzes the impact on the U.S. economy of Taiwan’s accession to the Trans-Pacific Partnership (TPP) Agreement. While the TPP is to be concluded by the twelve current negotiating parties, other regional economies will be able to join, consistent with APEC’s endorsement of the TPP as a “pathfinder” approach to an FTAAP, which contemplates APEC economies that are ready to do so proceeding faster than others in deepening trade relations. Taiwan has clearly signaled its interest in acceding to the agreement. We evaluate the impact using a computable general equilibrium model that takes into account tariff liberalization, preference under-utilization and utilization costs, liberalized rules of origin, reduction of non-tariff barriers (NTBs) on goods and on cross-border services, and liberalization of foreign direct investment in services and the resulting implications for services trade through foreign affiliates. The liberalization assumptions are based on “best guesses” as to what the TPP agreement and the terms of Taiwan’s accession would actually be. The formulation of these assumptions is informed by the pattern of concessions that TPP parties have made in recent trade agreements and other information available on the TPP process. We find that Taiwan's accession generates significant benefits for the United States; based on the accession assumptions, the accession would not trigger US sensitivities.

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